Bank Overdraft Fee Lawsuits | The Lyon Firm (2024)

What Are Some Common Types of Violations in an Overdraft Lawsuit?

Violations of bank overdraft terms can take many forms. These may include:

• Charging multiple overdraft fees on a single banking transaction
• Requiring customers to pay extended or repeating fees
• Reordering transactions with the intent to charge additional fees
• Charging overdraft fees where none is required (such as on a transaction authorized with a positive account balance)
• Applying interest charges that exceed stated limits
• Requiring excessive or unreasonable overdraft fee amounts
• Depositing funds in an irregular manner, causing the customer to exceed their withdrawal limit

These types of misconduct may constitute violations of various state and federal laws. They may involve multiple legal concepts like fraud, misrepresentation, breach of contract, and consumer protection violations.

They may also overlap with other types of banking issues, including unauthorized accounts, fake accounts, and data breach issues.

Such actions are serious and require legal action to hold the liable parties responsible for their acts. At The Lyon Firm, we have extensive experience delivering significant case results on behalf of our clients who were affected by corporate misconduct.

How Many Times Can a Bank Charge Overdraft Fees?

The maximum number of bank overdraft fees charged each day differs between banks. However, most banking institutions cap their charges between 4-6 overdraft fees per day (though some banks may charge as many as 12 fees to a person’s account in a 24-hour period).

There are four main types of overdraft fees charged by financial institutions:

1. Overdraft Fees: This standard charge is issued each time a bank approves a transaction that is higher than the balance of your funds. Many banks do not charge this fee if the discrepancy is less than $5, but that threshold differs between institutions.
2. Non-Sufficient Funds Fees (NSFs): This fee is charged each time a bank rejects a transaction because there is not enough money in your account to cover the amount. This fee amount is often the same as the overdraft charge, but an overdraft and an NSF fee should never apply to the same transaction. The bank either accepts or rejects the transaction, and applies the appropriate fee.
3. Overdraft Protection Fee: If you have sufficient funds in your savings account that can cover charges in your debit account, the bank may transfer those funds to “protect” you from an overdraft. That protection also charges a fee, but legally cannot be enacted automatically — you must opt-in to receive this service. It usually costs less than an overdraft fee, especially considering that you can be hit with multiple overdrafts during one statement period without notification that something is wrong.
4. Extended Overdraft Fee: Also known as an “extended overdrawn balance fee” or “sustained overdraft,” this may be charged if an account balance sits in the negative for a certain amount of time, like 5 business or 7 calendar days. Some banks charge this fee once every 5 days, while others may apply the fee every day until a checking account balance is above zero. The maximum amount of extended overdraft fees also varies between banks.

If you recognize any issues or discrepancies regarding these types of fees, you may have a legal claim. Contact us at (513) 381-2333 for guidance on how you can proceed.

These fees form a progressive chain that can quickly devastate a person’s finances. In one day, and without notification, a bank may reach their maximum of overdraft fees, and then continue charging NSF fees, increasing the amount you owe. After a week, they can start piling on extended overdraft fees as well. This chart shows the timeline of how one overdraft fee can compound:

This means that after just one paycheck error, a person could be in debt for a substantial amount of money in one month between bank statements. These kinds of unexpected fees could compromise a person’s ability to pay rent, afford transportation to work, or pay for childcare, food, or medicine. A lawsuit can help you recover what you lost, and possibly change these practices before they victimize others.

Many Americans are just one missed paycheck away from homelessness. The numbers vary between 40% pre-pandemic to nearly 60% in recent years. Silent overdraft fees from banks could push a family out of their home, permanently altering the trajectory of their future. Contact us at (513) 381-2333 for legal representation for your case.

Can I Sue My Bank for Overdraft Fees?

Yes, you can file a lawsuit against a bank based on their overdraft fees. Consumers should have the ability to sign up for a checking account that offers reasonable and clear bank overdraft fees. A consumer fraud protection lawyer can help assert your rights.

Here are examples of damages settlements from previous bank overdraft fee lawsuits:

• Bank of America agreed to settle a $410 million lawsuit that alleged it collected multiple overdraft fees on individual transactions from checking and savings account customers. The bank has said it will stop charging multiple fees every time it reattempts a single payment for years.
• TD Bank agreed to pay over $62 million in a bank overdraft settlement to resolve claims that the bank breached agreements by charging fees on items already assessed with a non-sufficient funds (NSF) fee.

Lawsuits regarding bank overdraft fees are often joined into one large entity known as a class action suit. Class actions are formed when a group of individuals is impacted by the same issue, like bank users across the country being hit with unfair overdraft fees.

How to Sue A Bank for Overdraft Fees

If you believe you have a bank overdraft fee claim, you should take the following steps:

• Gather any receipts and records related to the fees in question
• Contact a lawyer for assistance with your case
• Create a written account of the events and transactions leading up to the fee violation(s)
• Prepare any questions or requests you may have for your lawyer
• Don’t speak with any other parties without consulting your lawyer first; any statements you make could be held against you

Bank customers who have been effectively fleeced by deceptive checking overdraft fees and unfair banking policies may be able to file bank overdraft fee lawsuits. The Lyon Firm is investigating unfair banking practices, and reviewing a wide variety of class action litigation for plaintiffs nationwide. Contact us at (513) 540-3618 for representation.

Is It Illegal for Banks to Charge Overdraft Fees?

No, it is not illegal for banks to charge you overdraft fees. However, in some cases, the way in which they construct those charges may be considered deceptive billing practices, and there are some protections for bank users.

Here are key facts about overdraft fees:

• Federal law dictates that bank clients must opt-in and agree to overdraft protection before a bank or credit union may charge an overdraft fee.
• According to the Consumer Financial Protection Bureau (CFPB), overdraft fees constitute the largest cost for customers opening a checking account
• The average penalty for an overdraft is over $30, according to the Federal Deposit Insurance Corporation (FDIC). These fees rise consistently in small increments, but cost consumers billions every year.

Overdraft fees directly profit the banks which make the rules consumers must follow. There is a real incentive for banks to purposefully allow overdraft fees, as those fees efficiently transfer your money to their pockets.

Customers should be able to reasonably expect that their transactions will be processed chronologically — not highest to lowest, which makes each transaction more likely to overdraw an account and churn profit for a bank.